Microsoft to cut more than 3,000 jobs from ailing Xbox unit

Microsoft said Monday that it will cut 3,200 jobs from its struggling Xbox video game business.

The technology giant will immediately eliminate 1,600 positions, while other jobs will be cut as four game development studios leave the Xbox unit.

"Our business today is not healthy," Xbox CEO Asha Sharma, who took over the gaming division earlier this year, said in a memo to Xbox workers released by Microsoft. "We are operating at margins that are 3-10x lower than comparable platform and publishing businesses."

Sharma also acknowledged that Microsoft's investments in Game Pass, a subscription gaming service, and multi-platform services have grown more slowly than expected.

"As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox," she said.

Sharma said to expect another 1,600 job cuts over the course of the fiscal year that began last week.

Microsoft's Xbox job reduction this week comes amid a broader push by the company to lower its labor costs. Microsoft Chief People Officer Amy Coleman said in a blog post on Monday that the company is cutting 4,800 jobs overall, or just over 2% of its workforce.

The layoffs followed voluntary buyouts that Microsoft began offering to about 8,750 employees in May. More than 30% of eligible workers accepted those voluntary retirement offers, Coleman said.

"I also want to be direct that the roles eliminated today are not being replaced by AI," she wrote.

Microsoft announced in June that it would raise the prices of its Xbox consoles starting August 1, citing rising costs of storage and memory components in electronic devices.

The price of consoles with 512 GB of storage will increase by $100 to nearly $500, while those with 1 TB of storage will increase by $150.